Geithner Urges U.S. Congress, Europe to Spur Growth

Aug. 1 (Bloomberg) -- U.S. Treasury Secretary Timothy F.
Geithner called on European policy makers and lawmakers in
Washington to spur economic growth even as they seek long-term
measures to narrow budget deficits.

“There’s a lot of things Congress can do, in the near term,
not just in the long run, to make growth stronger,” Geithner
said in an interview with Bloomberg Television in Los Angeles
yesterday. European leaders also “have to do some more things
to help support growth in the near term,” he said.

Geithner, 50, said Congress should take advantage of low
borrowing costs to adopt measures to support the economy, which
he said must grow faster to create jobs and reduce an
unemployment rate stuck above 8 percent since February 2009. He
said such measures include helping homeowners refinance
mortgages and approving tax incentives for businesses.

“We pay about 1 1/2 percent for a 10-year Treasury now, to
borrow long-term now, because fundamentally people have faith in
the ability of the U.S. to solve its problems,” Geithner said.
“It’s sensible for us to take advantage of this moment to do
things that will make the economy stronger.”

Yields Tumble

Treasuries recorded a monthly gain yesterday as Europe’s
debt crisis underpinned demand for the securities and investors
awaited the results of central-bank policy meetings in the U.S.
and euro area this week.

Ten-year U.S. yields fell to a record 1.379 percent on July
25, compared with a high for the year of 2.38 percent on March
19, according to Bloomberg Bond Trader prices. They were at 1.48
percent as of 1:18 p.m. today in Tokyo.

The U.S. faces a so-called fiscal cliff of more than $600
billion in higher taxes and reductions in spending on defense
and other government programs that take effect at year-end
unless Congress acts. The nonpartisan Congressional Budget
Office has said the economy would shrink by 1.3 percent in the
first half of next year if the higher tax rates and automatic
cuts are kept in place.

“If you listen closely, there is a lot of bipartisan work
going on in the Congress, trying to lay a foundation for how to
work through these problems, how to replace those expiring tax
cuts and the automatic spending cuts with a more sensible
balanced package of reforms that again reduce those long-term
deficits,” Geithner said.

Credit Needed

European leaders must take steps including “bringing down
interest rates in the countries that are reforming and making
sure those banking systems can provide the credit those
economies need,” Geithner said.

“A big challenge they face right now is to figure out how
they put in place a stronger bridge to those longer-term reforms,
because, again, without growth, they’re going to find a
political basis for reform erode beneath their feet,” he said.

Geithner was speaking from the rooftop of a downtown Los
Angeles apartment building a day after returning from Germany,
where he held separate meetings with German Finance Minister
Wolfgang Schaeuble on the North Sea island of Sylt and in
Frankfurt with European Central Bank President Mario Draghi.

In a statement released after their meeting, Geithner and
Schaeuble “took note” of comments made last week by European
policy makers to “take whatever steps are necessary to
safeguard financial stability” in the 17-nation euro area.

To resolve crises, governments and central banks must work
together, Geithner said in the interview yesterday.

‘Moving in Parallel’

“You can’t put all of the burden on one of those
parties,” he said. “You need both moving in parallel, of
course, within the competence and the responsibility of their
authority.”

The Treasury chief said that “the human costs are acute”
in the European crisis. “Not just in Greece, but throughout
other countries in Europe, too. And the political costs in terms
of rising extremism are terribly troubling.”

Asked about the investigations into possible manipulation
of the London interbank offered rate, Geithner said “it’s very
important to our country” to have “an enforcement response
that’s very powerful and credible.” Regulators will need to
“take a careful look at how to make sure that we can deal with
the potential implications of this for the broader financial
system.”

Geithner last week told U.S. lawmakers that he was
concerned when he heard about potential weaknesses in Libor in
2008 and that he moved quickly to alert regulators in the U.S.
and U.K. Geithner was president of the Federal Reserve Bank of
New York at the time.

Barclays Fined

Banks including UBS AG, Citigroup Inc., Royal Bank of
Scotland Group Plc and Deutsche Bank AG are being investigated
worldwide for practices in setting Libor. London-based Barclays
Plc was fined a record 290 million pounds ($454 million) on June
27 for rigging Libor, leading to the resignation announcements
of CEO Robert Diamond, Chairman Marcus Agius and Chief Operating
Officer Jerry Del Missier.

Geithner has said he won’t serve another term if President
Barack Obama wins re-election.

“I haven’t had a chance to think about that much,” he
said when asked what he’ll do next. “I will think about it. But
I’ve got a lot going on at the moment.”